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Why Eldorado Gold is pulling out of Greece

The Canadian miner is to place projects on care and maintenance as uncertainty drags down share price

11 September 2017 - 19:12
Karolina Tagaris

President and Chief Executive Officer of Canadian Eldorado Gold Corporation George Burns listens to a question during a news conference in Athens, Greece, September 11, 2017. Picture: REUTERS/ALKIS KONSTANTINIDIS

Athens — Canada’s Eldorado Gold said on Monday that it would suspend investment at its Greek mines and development projects, blaming regulatory hurdles for halting one of the biggest investments in Greece since the country’s debt crisis.

Citing delays in permits from the Greek government, Eldorado said no additional investment would be made into the Olympias and Skouries projects and the Stratoni mine, which has been operational, in Greece.

It will place all its projects on care and maintenance from September 22.

The Skouries mine on the Halkidiki peninsula in northern Greece, a landscape of pristine beaches and lush forests, has long been a flashpoint with the authorities and a test of Greece’s resolve to push ahead with foreign investments.

Differences have lasted for years over testing methods applied to comply with environmental regulations and the project has provoked violent protests by locals who fear it will destroy the environment and Halkidiki’s tourist riches.

In announcing its decision, Eldorado said the delays had negatively affected the company’s project schedules and budgets, ultimately hindering its ability to invest and do business in Greece.

"I am disheartened to state that no additional investments will be made into Greece after September 22," CEO George Burns said in Athens. "We cannot continue to put capital at risk without these permits."

The suspension marks a tougher stance towards Greece by Burns, who became CEO in April. His predecessor, Paul Wright, took Eldorado into Greece with the nearly $2bn purchase of Skouries, Olympias and Stratoni in 2012.

Share price

The uncertainty about Eldorado’s Greek projects has weighed heavily on its share price, which is down 48% in the past year, touching a 14-year low of C$2.24 on August 4.

The company’s shares closed on Friday at C$2.49 on the Toronto Stock Exchange.

Greece, which has received three international bail-outs since 2010, is seeking investments to rebuild its economy and help it emerge from years of economic crisis.

During a visit by French President Emmanuel Macron last week, Greek Prime Minister Alexis Tsipras urged French businesses to invest in Greece and assured them "you won’t regret your choice".

But while publicly the leftist-led government backs investment, investors often complain of hurdles such as excessive red tape and labour union and political resistance.

Eldorado applied for licensing but the Greek energy ministry said it would launch an arbitration process in September to ensure that its Greek unit, Hellas Gold, respected its contractual obligations.

Eldorado said it was awaiting additional details from the Greek government about the arbitration process and would reassess its investment options in the country after the approval of the outstanding permits.

Burns said he was hopeful Eldorado could resolve the issue in talks with the government.

"I’m confident these mines will be built … these are fantastic assets and there is no credible issue in front of us for us not to be moving forward."

Responding to Eldorado’s decision, Greek Energy Minister George Stathakis said environmental licensing involved lengthy and detailed procedures in order to comply with European and national legislation.

"It is rather clear that the company is not accustomed to operating in European countries," Stathakis said in a statement, a view echoed by other senior officials.

"Had the people of Halkidiki, and all Greeks, been convinced that this investment is in line with European standards, that measures would be taken to not turn Halkidiki into a construction site … I believe everyone would be friendly towards it," Defence Minister Panos Kammenos said.